Old Power Plants Need New Rules

THE Environmental Protection Agency’s proposal earlier this week to reduce greenhouse gases from new power plants was hailed by many environmentalists, but unless steps are taken quickly to bring existing plants under the rule, it will create a perverse incentive for companies to keep running older, more heavily polluting power plants. That’s bad economics that could lead to dirtier air.

The proposal would regulate carbon emissions from future power plants but leave existing sources untouched. This is yet another instance in a more than 40-year pattern under the Clean Air Act in which old and outdated technology has avoided new environmental standards. The result is continuing unhealthy levels of pollution.

When the E.P.A. imposes tough standards on new plants but leaves old plants untouched, it distorts the economic considerations that companies face when deciding whether to construct new plants or invest in cleaner technologies. Why pay to build a new, cleaner plant when it’s cheaper to simply run an existing one and avoid the latest rules altogether?

These uneven standards also discourage plant owners from upgrading their facilities in anticipation of future regulatory changes. There is less benefit for them to invest in cleaner technology if they expect to be grandfathered under the old rules when new, tougher standards are adopted. This approach sets a destructive precedent by punishing plant owners who have taken measures to curb emissions at their plants. In business these lessons are not soon forgotten. And each time we exempt existing polluters from new, tougher standards, we create jobs for industry lobbyists paid to make sure the grandfathering never goes away.

A company investing shareholder dollars must decide whether a new power plant (which costs hundreds of millions of dollars) will be able to turn a profit. If executives look around and see that existing plants are permitted to pollute in larger quantities, they’ll realize that the new plant will be at a competitive disadvantage. In rule after rule, strict pollution control measures on new plants have not been paired with tougher standards on existing sources. This has kept the oldest and dirtiest polluters in business and is why the United States still has power plants built in the middle of last century that are belching pollution at rates that make us sick.

Because the lifetimes of these plants are measured in decades, this “old plant effect” has had a huge impact on total emissions. Standards for new sources are essential, but to work properly, they must go hand in hand with requirements on plants that are already polluting.

Fortunately, the E.P.A. can fix this. While the Clean Air Act allows the agency to grandfather existing sources, there are also provisions that give the agency authority to regulate new and existing sources while giving polluters the flexibility they need to bring down emissions at the lowest possible cost.

So far, the E.P.A. has declined to use this authority. The agency’s administrator, Lisa P. Jackson, said Tuesday that the E.P.A. has no plans to regulate for existing sources. But to get serious about limiting greenhouse gases, it’s not enough to impose limitations on plants that may never get built. We need to go to where the pollution is, and that is the old, dirty, coal-fired power plants that are, once again, being kept on life support by this rule.

Richard L. Revesz is dean of the New York University School of Law, a co-founder of the Institute for Policy Integrity and co-author of “Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Environment and Our Health.”